How to report correctly deductions of Mortgage interest and property Tax for my house after rental?

[LP1968]

Hi I rented my house for 9 months last year. So, I have included 75% of my Mortgage interest and property Tax as rental expenses. 

my understanding is that in the deductions, I need to report only the remaining 25% of my Mortgage interest and property Tax. However, when I enter in TurboTax the information from Form 1098 (lines 1 and 10 respectively), they do not get reduced by the amount already claimed as rental expenses. So, in the deductions (and in the Schedule A print out) the full amounts are shown! 

Is this correct? or should I override the reporting? if so, how? do i just type on  the 25% of the amount reported in Form 1098 (lines 1 and 10 respectively)? 

please advise. Thanks. 

[Carl]

Since you deal with rental property stuff well before you get to the Deductions and Credits tab, if you elected to have the program do the splits for you, in the SCH E section of the program, you just enter the total amount of mortgage interest and total amount of property taxes, and the program takes care of it for you. It's splits the mortgage interest and property taxes between the SCH E for the period of time it was a rental, and the SCH A for the period of time it was not a rental. That's why it's IMPORTANT to read the small print on every single screen.

You also have the option to do the splits yourself manually.

Take note that regardless of what option you chose, you have to pro-rate the property insurance for the period of time it was a rental. That portion of the property insurance that is for the period of time it was *not* a rental is just flat out not deductible anywhere on the tax return.

Do note that your SCH A itemized deductions have absolutely no impact what-so-ever on your tax liability until the total of all of your allowed itemized deductions exceed your standard deduction. For 90% or more of tax filers, this will never occur.

[LP1968]

Hi Carl. Thanks for the useful and prompt response! 

Because I am doing the splits manually (myself) in the rental (schE) part, please help me understand how to also do it correctly in the deduction (schA) part... 

I realize that schedule A deduction will NOT affect my federal tax, but most likely will my CA state tax, correct? 

Thanks again! 

[LP1968]

Hi. I still need help on this question, because I am doing the splits manually (myself) in the rental (schE) part. hence, Turbotax is NOT automatically adjus the deduction (schA) part... 

please help me understand how to also do it correctly in the deduction (schA) part... 

Thanks again! 

[Carl]

Because I am doing the splits manually (myself) in the rental (schE) part, please help me understand how to also do it correctly in the deduction (schA) part...

My difficulty is understand what it is you don't understand. So please bear with me if I come across as rude. That's not by intent, but for simplicity and brevity.

First, understand that property insurance is "NOT" deductible on the SCH A. Property insurance is "never" deductible on personal use property, and never has been. So when you pro-rate the property insurance for the time the property was a rental in 2019, the difference is *not* entered anywhere else on "any" tax return. (Federal or state)

If your property taxes for the year was $1,200 and you converted the property to a rental on Oct 1 of 2019, simply do the math.

$1,200 divided by 12 months in the year is $100 a month in property taxes. The property was personal use for the first 9 months of the year. So $900 is entered on the SCH A and you "WILL" check the box that indicates what you entered *DOES* *NOT* *MATCH* what is on your property tax bill, if (and only if) you are offered that checkbox to select. The difference is a SCH E rental property deduction.

Now lets say the mortgage interest reported to you on the 1098-Mortgage Interest Statement for that property is $7000. That amount divided by 12 months comes out to $583.33 a month. Since the property was personal use for the first 9 months of the year, $583.33 times 9 months gives us $5,249.97. The program will round that to the nearest dollar. So the amount of $5,250 will be what you enter on the SCH A for the Mortgage Interest deduction. Again, if presented a checkbox for indicating the amount entered is different that what's on your 1098, then you *WILL* check that box. The difference is a SCH E rental property deduction.